Railroads invest in

Four railroads have teamed up and invested US$10 million in a California company that will help provide one-stop transportation management services for their customers.

The railroads, Canadian Pacific Railway Co., CSX Corp., Norfolk Southern Corp. and Union Pacific Corp., recently announced that they have invested a total of US$10 million in Arzoon Inc. The privately-held company in San Mateo, Calif., has developed Internet transportation technology to help companies procure, monitor and manage transportation services using one or more modes of transportation – rail, highway, air or water. The site will be open to all transportation companies, and they do not have to invest to participate, according to Arzoon.

“These four railroads came together on their side and decided (to form this alliance),” said Kip Hawley, Arzoon’s executive vice-president of corporate development. “At first we were reluctant to take any investment from any carrier, but we decided to take it from the four railroads because it was the third round of funding, it wasn’t start-up money and because they said they wanted to demonstrate their commitment.”

Faced with increasing complaints of poor service from their customers, the railroads hope this new venture will allow customers to seamlessly transport their goods across North America. The site is expected to be up and running by mid-summer.

The railroads want to take advantage of the new technology to provide a seamless transportation package for their customers, said John Bromley, a spokesperson for Union Pacific.

“This is a new way to do that,” Bromley said. “This is an example of the old economy talking advantage of the new technology.”

In a statement issued by the railroads, John Snow, chairman and CEO of CSX said, “Alliances among railroads are the key to providing our customers with quality service.”

Len Cocolicchio, a spokesperson for Canadian Pacific, said improving customer service was at the heart of the decision to form the alliance. “We feel this is a way of improving service to railroad customers,” he said. “It’s a means of using new technology to make interline service seamless.”

But Donald Broughton, transportation analyst at A.G. Edwards & Sons Inc. in St. Louis, wasn’t very impressed by the news.

“In the short-term, this is a non-event,” he said. “In the long-term, it’s interesting. In the short term, [the railroads] have some significant service issues they have to focus on. Even if customers have the ability to track and trace [their goods], if the transportation takes two or three times as long as it should, tracking and tracing abilities don’t do them any good. [What good does it do] to track and trace a snail? Because it’s not very far from the last time you checked on it.”

Until the railroads can offer more reliable service to customers, the new Internet venture won’t provide them with any added value, Broughton added.

Edward Rastatter, director of policy for Arlington, Va.-based National Industrial Transportation League, a trade group of railroad and truck customers, said he thought the new service might improve service to customers.

“I don’t see how it would hurt,” he said. “But I wonder if it’s a coincidence these four railroads are the ones opposing the merger of the Burlington Northern Santa Fe and Canadian National.”

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